Giga-projects under construction are set to boost Saudi Arabia's entertainment and tourism offerings

Saudi Arabia is in the midst of developing a number of large-scale, complex and multi-purpose construction projects that aim to transform the wider economy. The Kingdom’s main giga-projects are NEOM, the Red Sea Project and Qiddiya. Rolled out as part of Vision 2030, these developments are globally unique in scope and ambition, and aim to stimulate broader economic growth. The developments follow on from earlier King Abdullah-era mega-projects, such as the King Abdullah University of Science and Technology, the King Abdullah Petroleum Studies and Research Centre, and the soon-to-be-completed King Abdullah Financial District. As of 2019 all three of the giga-projects had commenced their first phase, and by early 2020 had begun to show initial progress. The projects are set to bring significant volumes of steady work to the construction sector over the long term, starting with the need for roads and other critical infrastructure.

“Once the construction sector has adjusted to the changes laid out under Vision 2030, the plan is expected to stimulate long-term growth, and the private sector will likely enjoy a greater contribution to activity,” Muhammad Abusamak, general manager of Arabian Tile Company, a locally based building materials manufacturer, told OBG.

NEOM

Launched in 2017 by Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud, NEOM stands as the flagship project of Vision 2030 and post-oil diversification plans. As a $500bn mega-city of the future, it aims to become an international hub for a wide range of sectors and services. Completion is scheduled for 2030, but with a 26,500-sq-km site and 450 km of coastline, growth and development of the area is expected to continue well beyond then.

Located on the north-western edge of Saudi Arabia, the site is in proximity to Egypt, Jordan and Israel, and eventually aims to incorporate territory from neighbouring countries. The region has particularly favourable climatic conditions, with temperatures roughly 10° cooler than the GCC average.

At its core, the NEOM development aims to offer fresh thinking and new solutions to prominent global challenges. It is focusing on 16 strategic sectors including food, energy, water, environmental protection, urban living, and health and wellbeing. Branding itself as an accelerator of human progress and “a vision of what a new future might look like”, the project is seeking to become a living laboratory, a hub for innovation, and a leading sustainable ecosystem for living and working.

The project’s contribution to the country’s GDP is projected to reach more than $100bn by 2030. It stands to become the home and workplace for more than 1m people and is expected to attract up to 5m visitors annually, playing a key role in the Kingdom’s budding leisure tourism industry.

The project broke ground in 2019, with the commencement of phase 1 of the NEOM city development. That year the NEOM Bay Airport was completed and much of the project team relocated their offices from Riyadh’s Digital City to the site. Construction was due to begin at the site in 2020.

The Red Sea Project

The Red Sea Project is a luxury tourism venture being developed along 200 km of virtually untouched coastline on the west of the Kingdom. The site comprises nine islands surrounded by a vast desert landscape and mountains. It will include 50 new hotels with approximately 8000 rooms, a new international airport, and a town for the 35,000 inhabitants who will eventually live and work there. It aims to decisively position Saudi Arabia on the global tourism map.

Located between the coastal cities of Umluj and Al Wajh, on a site spanning approximately 30,000 sq km, the area will be roughly 300 km north-west of Medina and 150 km south-west of Madain Saleh, one of the country’s major UNESCO World Heritage sites.

The Red Sea Project is already on its way to setting new standards in sustainable development. It is planned to fully rely on on-site generated renewable energy – a significant ambition for a project of this scale. It also plans for its operations to be 100% carbon neutral with a zero waste-to-landfill policy. The project aims to create 70,000 new jobs and contribute SR22bn ($5.9bn) per year to the economy. It will likely be a special economic zone as well, with its own rules and regulations.

In September 2019 phase 1 commenced and John Pagano, CEO of The Red Sea Development Company, announced that the company hoped to award up to SR10bn ($2.7bn) in construction contracts by the end of 2020, although this target may be delayed by slowing business conditions due to the global Covid-19 pandemic. The first phase – which is to include 14 hotels with 3000 rooms across five natural islands and two inland sites – is expected to be completed in 2022, while full completion is scheduled for 2030-35.

In October 2019 the design contract for the site’s international airport was awarded to Foster + Partners and sub-consultant WSP Global. The airport will have capacity for 1m passengers per year and construction is expected to be completed in 2022. The design will follow sustainable and environmentally conscious principles, and will use the colours and textures of the Red Sea and its surrounding landscape in design features.

In March 2020 The Red Sea Development Company announced the partial completion of the 10,000 pre-fabricated and modular cabins it is installing for construction workers at the site. However, plans for the rest of the year are likely to be delayed, as government measures to help stop the spread of Covid-19 were put in place shortly thereafter.

Amaala

Located on the north-western coast of the Red Sea, Amaala is an ultra-luxury tourism project. The development will cover an area of 3300 sq km and serve as a resort and wellness destination with its own airport. It will consist of 2500 luxury hotel rooms, 700 residential villas, an equestrian club and four yacht marinas. By 2030 it is expected to contribute 0.6% to GDP. Phase 1 of the development commenced in 2019 and the entire project is scheduled to be completed in 2028.

Qiddiya

Qiddiya, for its part, is an $8bn entertainment city that is expected to become the Kingdom’s capital of entertainment, sports and the arts upon completion in 2030. Located in south-west Riyadh, Qiddiya will be the world’s largest entertainment city, spanning more than 334 sq km, which is roughly three times the size of the Walt Disney World Resort in Florida. More than 200 km of the site will be designated for natural conservation, including recreational activities and mountain sports.

The site will include over 300 recreational and educational facilities, including a 20,000-seat clifftop stadium, a Formula One racetrack, a Six Flags theme park, golf courses and cinemas. The development will offer experiences under five themes: parks and attractions; sports and wellness; motion and mobility; art and culture; and nature and environment. It has targeted attracting 14.5m visitors per year and contributing SR17bn ($4.5bn) to the country’s GDP by 2030. “The entertainment sector is currently booming in Saudi Arabia, and we hope developers and operators will be able to capture further disposable income moving forward,” Hathal Al Ultaibi, CEO of Alandalus Property Company, a Saudi commercial property developer, told OBG.

Construction began in early 2019, with the project’s master plan approved and revealed to the public that same year. In December 2019 on-site offices serving phase 1 were completed, and in February 2020 contracts were awarded for preparation of the project’s resort core and city centre, in addition to the installation of security fencing around the site. In October 2019 the Qiddiya Investment Company signed a wide-ranging memorandum of understanding with Samsung. As part of the partnership, Samsung will assist in the design, engineering and construction of Qiddiya’s sports complex. Phase 1 of the project is expected to be completed in 2023, with total completion scheduled for 2030.

Forecast

While great returns are anticipated from the giga-projects, questions remain over NEOM’s final end-use and whether there will be a shortage of contractors and materials needed to deliver the projects on schedule. For NEOM especially, raising the required investment to keep development at pace will likely be a challenge. While the Kingdom has many successful local firms, the giga-projects have seen a high qualification entry bar for contractors. In 2018 the government decreed that certain projects would be only be awarded to international contractors, which means a number of domestic businesses are no longer qualified and able to bid. However, there is a contractual condition that 30% of jobs within a project be awarded to local players.